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Use Life Insurance Company Ratings to Choose the Right Insurer

An insurance policy is only as good as the company that backs it.

Most life insurance companies are long-standing conservative organisations, that invest their funds wisely and are always mindful of risks in the market. And then, there are billion-dollar time-bombs like AIG that crash and burn when the market tanks (everyone remembers AIG, right? Or at least, everyone should).


This page:

Explains important criteria for assessing a potential insurer.

Suggests a quick method of checking a company's rating.

Lists additional reliable sources of life insurance company ratings info.

Life Insurance for as Little as $20/Month?

Premiums can vary by as much as 50% for the same coverage and options, so it pays to get quotes from as many reputable insurers as possible.

Use our quick 60-second quote form to find the coverage that's right for you, and a monthly premium that you can afford.

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Evaluate an Insurer Like you Would any Partner

There are five basic criteria that can be used when evaluating an insurance company. Let's take a look at them one-by-one:


Experience

Start close to home with the easy questions. Consider any personal experience you've had with a potential insurer. Ask family and friends about their experiences.

How quickly and easily are claims processed? Since life insurance is meant to guarantee a continued financial stability for your beneficiary, it is important to feel confident that your insurance company is stable as well.


Past performance

First, look at the past performance of the company. Although a company's future cannot ultimately be predicted by looking at past performance, it can still give you a general idea of what to expect. A general sense of how the company fares can be gleaned from their quarterly reports. Make notes of the good and bad trends.


Fiscal fitness

The fiscal fitness of the one area people often push to the back of their to-do list, especially when comparing policies on the base of premium costs. However, since you will be depending on them, consulting independent insurance company ratings is crucial.


Sidebar
It would be nice if there was a quick way to check and compare all of these ratings...

If you're looking for term life coverage, then get a quick quote from one of our partner carriers. Along with your monthly/yearly premium quote, you will receive the A.M. Best rating for each company that will offer you coverage.

Yes, it's that easy. Not that we would advocate not doing your homework as described above...

Get a quote and check ratings for free now.


The company's reputation

Once you buy the policy you will be dealing with the insurance company regularly - and your beneficiaries may too. It's important, then, for them to have good customer relations and a great claims handling reputation.

Information about the reputation of major carriers in your state should be easy information to obtain.

Ask around. Often, friends, co-workers, and family will know a bit about the life insurance company you are considering. Ask an insurance professional that does not have a stake in selling you a policy - their advice, though often still biased, is worth its weight in gold, as it will come "from the inside".


Insurance illustrations

Although we do not advise using an insurance company's publications as an evaluation tool, if you understand how to use them, they can be advantageous.

Life insurance companies distribute information about themselves in the form of "illustrations". These are designed to provide accurate facts and figures to potential customers, chiefly about how prevailing market rates affect their policies. However, they are often misleading and occasionally completely incorrect.

Of course a company will want to present itself in the best possible light, but it is your job to figure out which information is trustworthy, and which can be taken with a grain of salt.

Read our guide to insurance illustrations to learn more about this subject.

Insurance company rating agencies

Finally, you can check the ratings directly with a ratings agency. (These will the same as the ratings provided by one of our partner carriers, though you will be able to get more info beyond an A, AA or whatever grade).

We suggest using the rating guides published either by A.M. Best, Standard & Poor's, Moody's, Duff & Phelps or Weiss.

These agencies assess the insurance company by careful investigation of the company's financial report. Each agency has a different method and researches different criteria, so you may want to consult more than one.

If your company is not listed as an evaluated company in the insurance company ratings by one of the agencies it does not mean it got a bad review, it just means the insurance company did not pay the fee to be reviewed by that particular agency.

Make sure you look into the qualified solvency ratings if not the comprehensive claims-paying ability ratings - these identify troubled insurers.

In conclusion:

When you are choosing a policy, you shouldn't necessarily be driven by any one simplistic rule, like - "only buying from top-rated insurers". Instead, you should try to obtain a complete picture of as many prosepctive insurers as you can, before making your decision.

However, you can still use life insurance company ratings as a guide.

If you like a policy and feel comfortable with the carrier, a less-than-spectacular rating should not prevent you from purchasing the policy. If you think the tradeoff is reasonable, then go ahead and buy the policy you like best.








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